Leasing companies and fleet management companies battle it out to prove their outsourcing model is best for fleet.
While determining what functions are outsourced to a third party is an important decision for a fleet manager, it is also vital to choose the right provider once those functions have been identified.
Outsourcing to the wrong company can have a severe adverse impact on the operation of your fleet, but choosing the right one can help processes run smoothly.
If a fleet decides to outsource only one function, whether it is accident management, licence checking or something else altogether, it may make sense to outsource to a dedicated specialist as there will be only one supplier to manage.
However, if more than one function is outsourced, then some fleet departments may find it more desirable to appoint one company to look after them all, meaning they avoid having to deal with multiple suppliers, contacts and invoices.
“Different data streams from various suppliers in different formats may turn into a logistical and management nightmare,” says John Kelly, managing director at CLM.
“However, by employing a fleet management specialist on an outsourced basis, all vehicle acquisition, fleet admin and driver support can be managed from one supplier to optimise fleet efficiency.”
In these instances, the majority of fleets will usually choose either their leasing company or an independent fleet management company.
Predictably, both types of businesses argue that their model is best. In the red corner, are the fleet management companies.
“The selection of the partner is always a key decision and there are a number of different options out there,” says Richard Hipkiss, managing director of Fleet Operations.
“Although they sound similar, they operate in very different ways so there are a number of pros and cons to each of them.
“If you go to a fleet management business, it will have a whole range of suppliers for each category that ensures you get a fit for your organisation.
“You can also have the bespoke offering, whereas if you go to a leasing company you get a one-size-fits-all supply chain that may be great and may fit your fleet very well, but in most cases it won’t be the most efficient way of doing it for your fleet and it won’t be the most cost-effective.”
Sue Branston, country head, UK and Ireland, at Fleet Logistics, recommends fleets consider outsourcing to an independent fleet management specialist, working with a number of providers rather than to a leasing company on a solus basis “for a myriad of reasons”.
“For example, by working with more than one leasing company, competitive pricing is guaranteed on the day,” she adds.
“The sole lease company position means the customer is tied to their pricing strategy and the customer will not know whether they are getting the best deal.
“We are not saying it does happen, but there could be a risk of complacency. And, in reality, we find that solus leasing supply arrangements are quite rare in the current climate.
“However, having said that, we have two UK clients, one with 1,300 cars, the other with 800, which both use a solus leasing company for their fleets, but then employ us in a policing role to ensure that the fleet is being run effectively on their behalf.”
In the blue corner, are the leasing companies. Like fleet management companies, they also claim to provide the best service possible to clients.
“The key is obviously the volume of vehicles and making sure you are maximising the leverage within that volume,” says Ken Buckley, head of sales at TCH Leasing (pictured).
“For example, our technical manager has someone in his team that negotiates with repairers to make sure our labour rates are correct, that we are getting the right parts discounts, and that we are buying correctly.”
He adds that one of the advantages of using a leasing company to manage fleet functions is the knowledge they already have of the vehicles if they are leased through them.
“Sometimes where a repair hasn’t been carried out correctly, it is much easier if the contract hire company investigates their suppliers, as opposed to the separate provider trying to talk to the repairer about something that they’ve done with no real clout or information about what went on,” says Buckley.
“This can lead to a cost problem to the client in the end because it’s fragmented and not dovetailed together.”
Shaun Sadlier, head of consulting at Arval, adds: “A good leasing company will look to bring added value to a customer and, by doing this, enjoy a long-term partnership rather than seek a short-term gain.
“Allow the leasing supplier to assist in the formulation of your fleet strategy – you have appointed them as your experts and they have access to best practice, new legislation and innovation that will impact your fleet decisions.”
However, whichever type of business a fleet manager ends up appointing to manage fleet functions, there are some best practice procedures that should be followed during the selection process.
“It is important that the outsourcing partner offers transparent pricing and is really going to be the best fit for that fleet, not just the one with the biggest marketing budget and says they’re the best,” says Hipkiss.
Buckley adds: “Companies have their own ways of operating so they need to find a partner that suits the way they function. If they find somebody that’s culturally right for them as a business, I think they will generally end up with a long relationship.”
Fleet managers should ask for referrals from potential suppliers and take the time to follow these up.
“Make sure that you, as the fleet or procurement manager making the decision, actually get into that organisation,” says Hipkiss.
“Ask to see systems and processes: that can be really telling because occasionally someone could say we’ve done x, y and z for somebody, but that may not turn out to be quite right.
“Speak to the person who you will be dealing with day-to-day and who will be working with your drivers because understanding how they work is really important in the decision-making process.
“The organisation should be open to getting prospects and potential new people into their offices and operations to really get into that detail.”
Sadlier says fleet managers need to make sure they are focused on the reasons behind any visit to gain any real insight from it.
“You need to have a clear objective to ensure there is positive evidence that a potential supplier is able to provide the service quality and cost control you are looking for,” he adds.
However, Sadlier warns that the work involved in outsourcing a fleet function does not end with the moment when a contract is signed with a partner.
“There should be a clear management strategy in place that will continually monitor the supplier’s performance. This will benefit both parties,” he says.
“It is sensible to put in position service level agreements (SLAs) that best fit your objectives and, wherever possible, introduce measurements of end-users – meaning driver satisfaction. Then, you should agree and set out a clear timeline for complaint management and reporting.
“Be very clear about, and document, which processes are to be undertaken by the external company and which are to be kept in-house.
“Also, ensure that all internal stakeholders are aware and agree with the new procedures.”